Sky News reported that the EU's largest economy is experiencing the longest stagnation since World War II, as the latest figures show Germany continues to fall into recession for the second consecutive year in 2024. The forecast for the situation in 2025 is not very optimistic, regardless of who will win the upcoming election.
According to the German Federal Statistical Office, the country's GDP will decrease by 0.2% in 2024, after falling by 0.3% in 2023. This is the longest period of recession since World War II.
It is worth mentioning that this decline comes as most economic experts predict Germany will achieve slight growth by the end of the year. However, preliminary figures show that the German economy unexpectedly declined in the fourth quarter of 2024.
German Chancellor Olaf Scholz is facing great pressure as there are only six weeks left until the national election. In the context of a stagnant economy, voter dissatisfaction will be a challenge for any candidate.
Meanwhile, Germany is facing further pressure from the US, as President Donald Trump prepares to return to the White House and apply new tariff measures. According to Reuters, Germany's trade surplus with the US reached a record 65 billion euros in the first 11 months of 2024, making Germany the main target of new trade policies.
In addition, the manufacturing sector - a pillar of the German economy - is suffering heavy damage due to high energy prices since the Russia-Ukraine conflict broke out, along with fierce competition from Chinese manufacturers. The auto industry, with large corporations such as Volkswagen, Mercedes-Benz and BMW, struggling to switch to electric vehicle manufacturing while facing low prices from Chinese manufacturers such as BYD.
Consumption spending in Germany remains "frozen" as people tighten their savings due to economic instability.
Many large-scale layoffs have caused a stir in the labor market. In the first 10 months of 2024 alone, more than 60,000 workers at large corporations such as Siemens, Bosch, Thyssenkrupp and Deutsche Bahn lost their jobs. Volkswagen is even considering closing a factory in Germany - something unprecedented in its 87-year history.
The Bundesbank's economic forecast from the German central bank shows that GDP will increase by 0.2% in 2025. However, this increase will not be significantly different from a slight decrease. Some experts, such as Jens-Oliver Niklasch from LBBW Bank, are more optimistic, saying that Germany will continue to fall into recession for the third consecutive year.
However, there is still some hope. The European Central Bank is expected to cut interest rates aggressively this year, which could support the economy. At the same time, the new German Chancellor, expected to be Friedrich Merz from the CDU/CSU party, could consider lifting the "debt" - which limits the government from having a budget deficit of more than 0.35% of GDP/year - to increase defense spending as required by the US, while stimulating economic growth.
However, all of these things are now possible, not things that will happen. Meanwhile, the economic downturn could push German voters to the far-left coalition Sahra Wagenknecht or the far-right AfD.
